India retains fastest growing economy tag

India's national income expanded at a whopping 7.9% in the March quarter compared with the 7.2% in the December quarter, beating consensus estimates of a 7.5% gross domestic product (GDP) growth.

For the fiscal 2016, the GDP growth at 7.6% compared with 7.2% of the last fiscal, was line with the expectation of economists.

The huge jump in the January-to-March or the fourth quarter GDP was led by robust growth registered in the mining, electricity, water and gas production and a revival in the farm output.

After registering negative and slow growth for long, the farm sector grew at 2.3% in the March quarter compared with a 1% contraction in the December quarter. Mining climbed to 8.6% as against 7.1% in the quarter before.

Electricity, water and gas production growth also sequentially up to 9.3% from 5.6%.

Manufacturing growth dipped a little at 9.3% in the fourth quarter from 11.5% in the previous quarter even as services fell to sub-9% growth during the same period.

The March quarter numbers cheered industry lobby body Confederation of Indian Industry (CII), which has forecast a GDP growth of 8% in the current fiscal over a forecast of mid-to-high 7% growth by other agencies.

Chandrajit Banerjee, director general, CII, said the "impressive GDP print pointed to a revival of growth impulses which, going forward, would gather further momentum".

"The numbers show that consumption demand has been the main driver of growth in 2015-16 with investment continuing to perform below potential as compared to last year," he said in the statement issued by CII.

He expects revival in investment with continued with public spending by government that will spur private investment "to rekindle a new demand cycle in the economy".

Rishi Shah, economist, Deloitte, said; "Private investment figure is the only red herring in the numbers that are otherwise pretty much in line with expectation." He said overall investment would continue to be driven by the government.

"It can be expected that investment levels may not move up in the short-to-medium term. The revival is likely to be driven by government push. It'll be another two-three quarters before we see some investment happening from the private sector," he said.

Shah said the core sector was showing a pickup in its performance registering a third month of acceleration in April as it touched 8.5% as compared to -0.2% last year.

"This bodes well for the economy as it is a major determinant in alleviating the supply side constrains in the economy. Growth in the core sector is being supported by robust increases in electricity generation and some pick up in steel production that could be on the back of increases in international prices. A few more months of such growth levels could possibly indicate that the recovery is gaining steam," he said in the statement issued by Deloitte.

Anis Chakravarty, lead economist and partner, Deloitte, said the government data showed the Indian economy had not completely recovered but was on its way to it as only some sectors showed growth.

He pointed that while consumption was moving up, investment levels continued to remain low.

"In fact, gross fixed capital formation registered a decline in Q4 (fourth quarter) as compared to the level a year ago. It can be expected that investment levels may not move up in the short term and even over the medium term, the revival of investment is more likely to be driven by the government's push," said Chakravarty, who believes a lot would depend on the fate of monsoons and overall demand levels in the economy.

Even though he expects growth levels to rise in the coming quarters, Chakravarty does not see it breaching 8% and expects the next fiscal's growth to be around the 7.6%.